Ukraine Quarterly Digest: July–September 2019

BY ANDRIAN PROKIP

The third quarter of 2019 showcased Ukraine’s vibrant political life. The country held parliamentary elections and established a new cabinet. Power has now been consolidated in one political party, led by recently elected President Zelenskyy. Parliament started amending current legislation and reforming the political system with extraordinary speed. Over the summer the new Ukrainian administration was dragged into an investigation of U.S. president Donald Trump.

1. INTERNATIONAL AFFAIRS

Relations with the EU

The 21st Ukraine-EU Summit was held on July 8 in Kyiv. Attendees discussed implementation of the EU-Ukraine Association Agreement and reaffirmed the strength of the political and economic ties between the EU and Ukraine. The EU commissioners—who are nearing the end of their terms and about to step down—have also reiterated their support for Ukraine's' sovereignty and territorial integrity and assured Kyiv that their successors will continue this policy. Finally, representatives of the EU and Ukraine signed an agreement to provide additional support worth €10 million to the Sea of Azov region to help mitigate the impact of Russia’s actions there.

PACE. On July 2, just before the parliamentary elections, the Speaker of the Verkhovna Rada, Andrii Parubiy, canceled Ukraine’s invitation to the Parliamentary Assembly of the Council of Europe (PACE) observer mission. This was his response to PACE’s decision to restore the voting rights of the Russian delegation. The PACE mission left Kyiv ahead of schedule and suspended its election-monitoring activities. The president of PACE expressed regret for Parubiy’s decision. The Ukrainian MFA responded that Ukraine is not obliged to invite the PACE mission.

Relations with Russia

On July 11, President Zelenskyy held a phone conversation with his Russian counterpart, Vladimir Putin. The call was initiated by the Ukrainian side. Among other issues, the parties discussed the peace process in the Donbas and the release of Ukrainian servicemen. A follow-up conversation was held on August 7.

On September 7, Russia and Ukraine conducted an exchange of prisoners: thirty-five Ukrainians were released from Russian prisons and returned to Kyiv in exchange for Ukraine’s release of the same number requested by Russia, most of whom were Ukrainians who supported the armed separatists in the Donbas. The thirty-five Ukrainians released by Russian included all twenty-four seamen seized during the November 25 incident in the Kerch Strait and eleven political prisoners: Oleg Sentsov, Edem Bekirov, Volodymyr Balukh, Roman Sushchenko, Oleksandr Kolchenko, Pavlo Hryb, Mykola Karpyuk, Stanislav Klykh, Yevhen Panov, Oleksiy Syzonovych, and Artur Panov.

Russia was obliged to unconditionally release the Ukrainian servicemen, according to a May 25 decision by the International Tribunal for the Law of the Sea. However, Russia disregarded the order and held out for the exchange.

Among the prisoners that Ukraine released and transported to Russia was Volodymyr Tsemakh, a prominent suspect in the downing of Malaysia Airlines Flight MH17 in July 2014. He is believed by prosecutors to have been the driver of the Russian BUK missile battery that brought down the plane. The release of Tsemakh was one of Russia’s conditions for a prisoner swap. A couple of days after the exchange, Tsemakh’s daughter said he had returned to the noncontrolled territories in Donetsk region.

U.S.-Ukraine Relations

The Trump-Zelenskyy phone conversation scandal. On July 25, the Ukrainian and U.S. presidents held a phone conversation that subsequently became the starting point for investigations in the United States against President Donald Trump and kicked off a number of resignations. In late August, information regarding this first appeared in the U.S. media, in the form of claims that President Trump had decided to hold up congressionally approved military aid for Ukraine as a way to pressure his Ukrainian counterpart into doing his bidding. There is a suspicion that President Trump wanted Ukrainian authorities to provide him with information that could harm the Democratic presidential candidate Joe Biden.

On September 23, President Zelenskyy visited New York to participate in the UN General Assembly session. He met with Trump, after which there was a joint press briefing for the media.

The Motor Sich issue. In late August, during a visit to Kyiv, U.S. national security adviser John Bolton tried to persuade the owners of Motor Sich factory not to sell their share of the enterprise to Chinese companies. Motor Sich is among the largest manufacturers (and the only one in Ukraine) of airplane and helicopter engines and gas turbines. However, the Ukrainians informed Bolton that the deal had already been approved. The American concerns are connected to the U.S. administration’s fears that the deal would give Beijing vital defense technologies. With the onset of armed conflict between Ukraine and Russia, Motor Sich has lost its huge market in Russia, and therefore its owners thought that selling the plant to China might help avoid bankruptcy.

Relations with Other Countries

Turkey. On August 7–8, President Zelenskyy visited Turkey and met with President Recep Tayyip Erdoğan. The two tried to find common ground regarding trade, transportation, and energy. They also discussed finalizing a free trade agreement, which is “99 percent ready,” according to Deputy Foreign Minister of Ukraine Vasyl Bodnar. During his visit, President Zelenskyy also met Ecumenical Patriarch Bartholomew, a patron of the recently created Orthodox Church of Ukraine.

Israel. On August 18, Israeli prime minister Benjamin Netanyahu visited Ukraine and met President Zelenskyy. This was the first visit of an Israeli PM in twenty years to Kyiv. The two leaders signed a joint cooperation agreement on investment, technology, education, agriculture, culture, and sports.

Poland. On September 1, President Zelenskyy paid an official visit to Warsaw, where he met with his Polish counterpart, Andrzej Duda, on the sidelines of a ceremony marking the eightieth anniversary of the outbreak of World War II. Zelenskyy characterized this visit as a breakthrough in relations between the two countries. In his public speech, President Duda reminded his audience of the Russian aggression against Ukraine and Georgia. Apart from this allusion, it was unclear whether the parties reached or signed any agreement. However, there are signs of warming relations between Warsaw and Kyiv.

For the last couple of years, relations between Poland and Ukraine have been tense because of differences in official national memory policies. These differences led to acts of vandalism of Ukrainian memorial sites and monuments in Poland, followed by Ukraine’s tit-for-tat ban on building new or restoring old Polish memorials, as well as the exhumation of Polish burials on Ukraine territory. Zelenskyy said during the visit that he is ready to lift the ban.

First Contacts with Other International Leaders

During President Zelenskyy’s visit to Poland he met multiple top officials from other countries he has not yet visited. A meeting with U.S. president Trump was scheduled, but the president canceled, citing the expected devastating impacts of Hurricane Dorian at home. Instead Zelenskyy met with Vice President Mike Pence and discussed securing Ukraine’s energy independence. Zelenskyy also met with the leaders of Belgium, Georgia, and Lithuania.

2. INTERNAL AFFAIRS

Parliamentary elections and establishing a new government in Ukraine. On July 21, Ukraine held parliamentary elections, as mandated by a presidential decree that simultaneously dissolved the Verkhovna Rada. The Servant of the People party, established by candidate Zelenskyy to support his run for the presidency, received an unprecedented level of electoral support. The party won a majority in parliament, taking 254 seats out of 450. (More about these elections can be found in an earlier Focus Ukraine blog post.)

This unprecedented result is an opportunity to introduce the reforms Ukrainian society has been waiting for. However, it is also a challenge, since a single-party majority may dilute the impact of other groups on decisions. (Please read another analysis of risks to Ukraine’s democracy on the Focus Ukraine blog.)

On August 29, the newly elected Verkhovna Rada held its first session. Since then the dominant political party and President Zelenskyy personally have been responsible for all the changes in the country and are striving to fulfill people’s expectations, a daunting and complicated task.

From the very first day, the new Rada began approving many new laws. Representatives of the ruling party have said they intend to introduce 465 amendments to Ukraine’s constitution by the end of 2019. Many experts, however, have expressed concern that such a fast pace of voting could affect the quality of laws passed in haste. Furthermore, there are instances of voting taking place in violation of the Rada’s official legislative practices.

One of the most important recent decisions was the cancellation of MPs’ immunity from arrest and prosecution, previously guaranteed constitutionally. But parliament still must amend the Criminal Code to make the lifting of immunity effective.

To restore balance to parliament’s and the president’s authorities, on September 10 the Verkhovna Rada passed a bill on presidential impeachment. However, this bill still does not deliver a real system of checks and balances as Zelenskyy’s party is the single ruling faction in parliament.

The Verkhovna Rada also approved a constitutional amendment stipulating a decrease in the number of MPs from 450 to 300. The amendment is now with the Constitutional Court for evaluation. Prior to that, the Verkhovna Rada introduced a new norm that permits firing MPs who miss more than a third of the parliamentary sessions.

Also, the Verkhovna Rada has sent to the Constitutional Court for expert opinion proposed amendments that give the president the right to appoint and dismiss the head of the National Anti-Corruption Bureau of Ukraine and of the State Bureau of Investigation, as well as the authority to establish national regulatory commissions. This step is intended to avoid conflicting authority and to harmonize the current version of the constitution and the laws governing these agencies. It also increases presidential authority.

New cabinet. The Rada has appointed Oleksiy Honcharuk the new prime minister and has approved all the members of the new cabinet. The thirty-five-year-old Honcharuk previously served as deputy head of Zelenskyy’s Presidential Office, ran an independent think tank, and served as adviser to the minister of environment and natural resources. Most of the ministers in the new cabinet, however, are newcomers to public service.

New general prosecutor and amended judiciary legislation. On August 29, the Ukrainian prosecutor general Yuriy Lutsenko officially resigned, with parliament approving the resignation on the same day. Also that day President Zelenskyy nominated Ruslan Riaboshapka for this position; Riaboshapka was confirmed by parliament the following day. Riaboshapka was President Zelenskyy’s adviser during the campaign and a member of Ukraine’s National Agency on Corruption Prevention.

Central Election Commission. On September 13, the Ukrainian parliament voted to dismiss the Central Election Commission. The CEC members were approved less than a year ago with seven-year mandates. However, President Zelenskyy accused them of showing bias during the recent election campaign, and the Verkhovna Rada supported his suspicions.

Major Investigations

The State Bureau of Investigation (SBI) has launched investigations into the activities of former president Petro Poroshenko while he was in office. The SBI sees him as a witness or suspect in twelve cases. Charges include applying pressure to the courts, possible tax evasion during the selling of Poroshenko’s TV channel, abuse of power in ordering three navy ships to cross the Kerch Strait, which led to the arrest of twenty-four Ukrainian servicemen, and announcing martial law in Ukraine in late 2018.

Earlier, in June, President Zelenskyy during his meeting with the chiefs of the National Anti-Corruption Bureau of Ukraine (NABU) and the Specialized Anti-Corruption Prosecutor's Office demanded proof of the efficacy of their services. The president gave them three months to demonstrate results. In July, NABU conducted searches of various companies, some of which were tied to former president Poroshenko. In response, the political party European Solidarity, chaired by Poroshenko, claimed that the raid, which was recorded on cameras, had been staged for political purposes in the run-up to the parliamentary elections later that month.

NABU has also demonstrated progress in the corruption case connected to the electricity pricing formula, the so called “Rotterdam plus” formula, that was used until the new electricity market model came into force on July 1, 2019. This issue was extremely politicized in Ukraine over the past two years since many public persons considered that the formula benefited one oligarch, not the state’s coffers or energy end-users. However, another big electricity producer, the state-owned Centenergo, also benefited from applying this approach.

The security service of Ukraine blamed the Kryvyi Rig mill, part of the Luxembourg-based global steelmaker ArcelorMittal, for polluting the environment and searched the plant. The security service temporary seized some of the company’s assets. On September 10, ArcelorMittal decided to send 10 billion UAH in profit to its parent company abroad instead of investing the amount in Ukraine, as it had planned to.

3. PROGRESS IN REFORMS AND SUCCESS STORIES

Economic Betterment

In 2019 Ukraine again improved its ranking on the Fraser Institute’s Economic Freedom of the World index. Also, the Fitch Ratings agency made a positive assessment of Ukraine and upgraded Ukraine's Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDR) to B from B− in September. On September 27, S&P Global raised Ukraine's long-term foreign and local currency sovereign ratings to B from B−. S&P explained the improved ratings by pointing to rising foreign currency reserves, stronger growth, and narrowing fiscal deficits.

Amending Legislation on the Judiciary

On September 10, parliament voted to amend a list of laws regulating the activity of the prosecutor general’s office in Ukraine and approved a judicial reform bill. These amendments, among other things, broaden the power of the prosecutor general, who will now be responsible for appointing the heads of the regional prosecutorial offices, instead of a special committee; halved the number of Supreme Court judges; and confirmed the appointment of a new, smaller Supreme Court membership.

Earlier, EU and Canadian ambassadors had expressed concern regarding these amendments, especially those broadening the prosecutor general’s power and the reduction in the number of Supreme Court judges. However, the Verkhovna Rada dismissed these concerns. On September 23, President Zelenskyy signed the amendments regarding the judiciary, which entered into force.

4. THE SITUATION IN THE DONBAS

The situation in the Donbas did not change appreciably over the summer. The number of attacks (from both sides) remained between ten and thirty per day, with many human casualties resulting.

On September 13, the Ukrainian foreign minister announced the administration’s intent to hold local elections everywhere, including in the noncontrolled part of the Donbas. Holding elections in the noncontrolled areas is part of the Minsk Agreements. This decision was made in Kyiv after Putin and French president Emmanuel Macron agreed on further negotiations in the Normandy format (a diplomatic group of senior representatives of four countries, Ukraine, Germany, Russia, and France, convened to resolve the war in eastern Ukraine). The issue of holding elections in the occupied territory has been discussed since 2016. To be recognized by Ukraine’s government, the elections must be free and conducted in accordance with Ukrainian law. The OSCE mission is to observe these elections and deliver its assessment. The proposal to hold elections in the occupied territories under Ukrainian law is known as the Steinmeier formula and has met considerable resistance in Kyiv; however, no better way forward out of the current impasse is on the horizon.

During the September 18 meeting of the Contact Group in Minsk, the Ukraine delegation refrained from signing the election agreement, and the matter was tabled for the time being. On October 1, President Zelenskyy said that Ukraine had signed the agreement on elections, and that the delay was due merely to Kyiv scrutinizing the wording of the agreement.